Report sheds light on hurricane fraud investigations

By Daniel Pulliam

January 12, 2006

An unreleased report obtained by the Associated Press Wednesday fills in the details of efforts by agency inspectors general to regulate the $62.3 billion appropriated for hurricane relief on the Gulf Coast.

The report, published by the President's Council on Integrity and Efficiency and the Executive Council on Integrity and Efficiency and delivered to Rep. Ed Whitfield, R-Ky., chairman of the House Energy and Commerce subcommittee on Oversight and Investigations on Dec. 28, describes the oversight efforts by the 21 agencies involved in the cleanup.

In one instance, inspectors found that the Federal Emergency Management Agency was overcharged by more than $3 million as the result of an accounting error. FEMA paid the company $4.9 million for food and lodging at base camps throughout Louisiana.

According to the Associated Press, payments have been suspended and the company has fired the accounting company that figured the incorrect bill.

The report recommended that work on temporary housing by the Veterans Affairs Department stop because FEMA had not completed its review of the $28.4 million contract. Work would continue at the agency's own risk because the VA had started before the contract was approved, the inspectors said.

Another audit found that FEMA gave an extra $2.7 million in public assistance funding to Jefferson Davis Parish in Louisiana. The report recommended that agency personnel follow the appropriate management control procedures.

Most of the audits discussed in the report were still under way. Some had yet to begin.

The $62.3 billion appropriated for recovery is split between the FEMA, which received $60 billion, and the Defense Department, which received $2.3 billion, of which $400 million went to the Army Corps of Engineers, according to the report.

As of the end of November, $26 billion of the $62.3 billion had been allocated to short-term needs, $23 billion was obligated as a result of contracts, grants and FEMA assignments to other agencies, and $8 billion was spent on a variety of response programs.

The 141-page report was published on the Web site of the Washington-based nonprofit government watchdog group Project on Government Oversight.

"Some of the audit findings confirm our worst fears -- agencies were ill-prepared to meet the country's contracting needs," said Scott Amey, POGO general counsel. "These audits ensure that contractors did not exploit mistakes that may have been made in the chaotic rush following the hurricanes."

In the first 90 days after Hurricane Katrina hit the Gulf Coast - marking what would be the first of three storms to affect the region -- more than 4,700 contracts worth $8.1 billion were awarded. Unlike most disasters where the response period lasts 72 hours, this "initial response to help the millions affected by the hurricanes lasted approximately three months," the report stated.